The Changing Rules of Trust in the Digital Age

During a recent stay at the Disney Swan hotel in Florida, I confess I did something in the bathroom I have done many times before. I used too many towels and carelessly left them on the floor. It’s not something I’ve thought much about before: I leave the hotel and who’s to know? But something struck me as I walked out the door. I would never do this as a guest staying in a place on Airbnb. I behave differently because of the reputation system in place that means not only do I rate hosts, but they rate me. Trust lies intimately between the perceptions of the two users.

We can point to this example and extract a sign of how online trust facilitated by digital tools can change our “real world” behavior. It’s easy to see how one careless towel toss could impact my ability to transact on Airbnb in the future. But what it illustrates is a paradigm shift. A new world of trust is emerging: one where trust lies in the hands of individuals, not in the big bellies of institutions.

This post is one in a series of perspectives by presenters and participants in the 7th Global Drucker Forum.

Since the industrial revolution, institutional trust – the confidence in the relationship between individuals and corporations or organizations – has been the norm. We have trusted that financial institutions, universities, media companies and other big corporations, will create the rules and enforce compliance that will keep us safe and make goods and services reliable.

This framework of trust has failed many of us through wrongdoing, scandal, or sheer ineffectiveness, and is consequently crumbling. Gallup has asked the following question annually since 1973: “Now I am going to read you a list of institutions in American society. Please tell me how much confidence you, yourself, have in each one: a great deal, quite a lot, some, or very little?” In June 2015 survey, the question revealed that public confidence had slumped across all major institutions, except the military and small business, to a historic low.

But the erosion of institutional trust is not only because we’re asking challenging questions about the structure and size of institutional systems, and the reputations of those who lead them. It’s because institutional trust isn’t designed for the digital age.

Think of the characteristics of “institutional trust” – big, hierarchal, centralized, gated, and standardized. It works if you are Goldman Sachs, AT&T, or Pfizer but it makes no sense if you are network or market-based company like Airbnb, Lyft, or Etsy. The DNA of “peer trust” is built on opposite characteristics – micro, bottom-up, decentralized, flowing and personal. The result of this shift is not only the emergence of disruptive new business models. Convention in how trust is built, lost and repaired – in brands, leaders and entire systems – is being turned upside down.

We are inventing a type of trust that can grease the wheels of business and facilitate person-to-person relationships in the age of distributed networks and collaborative marketplaces. A type of trust that transforms the social glue for ideas whether it be for renting your house to someone you don’t know, making a loan to unknown borrowers on a social lending platform, and getting in a car with a stranger from being considered personally risky, to the building blocks of multi-billion dollar businesses.

And the power of this emerging trust dynamic is being harnessed by both start-ups and established brands. On September 30, 2015, Amazon launched Flex in Seattle, a new crowdsourced delivery service that relies not on traditional couriers, but ordinary people to bring packages to you. The deliverers are not employed by the e-commerce giant, and do not wear their uniforms or drive Amazon branded vehicles. Some may say it is merely Amazon tapping into a cheap labor pool – “gig-economy workers” as they have been contentiously dubbed – to drive down the costs of Prime Now, their popular one-hour delivery service. But what I find more interesting is the dynamics of trust Amazon is tapping into to get their packages into the hands of customers. In the crowd-shipping model, trust is no longer linear and tightly controlled between Amazon and its customers. Instead, trust sits in a web between customer and driver, driver and Amazon, customer and Amazon.

Without a doubt this shift in trust will be messy. New complexities will emerge around risk, discrimination and accountability that will require not just new regulatory and legal frameworks but a different organizational mindset to find a way through. And we’ll have to find a way through because to be human, to have relationships with other people, is to trust. Perhaps the disruption happening now is not about technology; it is how it enables a shift in trust, from institutions to individuals.

This post is one in a series of perspectives by presenters and participants in the 7th Global Drucker Forum, taking place November 5-6, 2015 in Vienna. The theme: Claiming Our Humanity — Managing in the Digital Age.

Rachel Botsman is a global expert on the collaborative economy. She is the co-author of What’s Mine Is Yours and a visiting lecturer at University of Oxford, Saïd Business School